The thoughts of the FOMC from a mere three weeks ago - before a 30bps rise in 10Y yields (40bps in 30Y), 5% rise in the NASDAQ, 8.5% rise in AAPL, and 85bps compression in Spanish bond spreads - are out. It appears little has changed in their muddle-through, always at-the-ready, wish-it-were-better view of the world. Via Bloomberg,

*FOMC PARTICIPANTS SAW ECONOMY DECELERATING AFTER JUNE MEETING

*MANY FOMC PARTICIPANTS SAID MANUFACTURING WAS SLOW OR FALLING

*FOMC PARTICIPANTS DISCUSSED QE, EXTENDING 2014 FORECAST ON RATE

*FED STAFF SAID MARKETS HAVE LARGE CAPACITY TO HANDLE MORE QE

*MANY FOMC PARTICIPANTS SAW NEW QE AS BOLSTERING U.S. RECOVERY

*MANY ON FOMC FAVORED EASING SOON IF NO SUSTAINED GROWTH PICKUP

Translation: "Many on FOMC want the S&P at all time highs without actually doing any QE, ever, because that will mean the Fed is officially out of bullets"

Most members continued to anticipate that, with longer-term inflation expectations stable and the existing slack in resource utilization being taken up very gradually, inflation would run over the medium term at a rate at or below the Committee’s objective of 2 percent. In contrast, one member thought that the economy may be operating near its current potential and, thus, that maintaining the Committee’s current highly accommodative policy stance well into 2014 would pose upside risks to the inflation outlook.

Thank you Lacker.

The key section from the minutes that is briefly pushing stocks higher:

Many members expected that at the end of 2014, the unemployment rate would still be well above their es-timates of its longer-term normal rate and that inflation would be at or below the Committee’s longer-run objective of 2 percent. A number of them indicated that additional accommodation could help foster a more rapid improvement in labor market conditions in an environment in which price pressures were likely to be subdued. Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a sub-stantial and sustainable strengthening in the pace of the economic recovery. Several members noted the bene-fits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action. One member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. At the conclusion of the discussion, members agreed that they would closely monitor economic and financial devel-opments and carefully weigh the potential benefits and costs of various tools in assessing

On what form the future QE may be - first LSAP

One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to ¼ percent. It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed. Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. In addition, some partici-pants noted that a new program might boost business and consumer confidence and reinforce the Committee’s commitment to making sustained progress toward its mandated objectives. Participants also discussed the merits of purchases of Treasury securities relative to agency MBS. However, others questioned the possible efficacy of such a program under present circumstances, and a couple suggested that the effects on economic activity might be transitory....Several worried that additional purchases might alter the process of normalizing the Federal Re-serve’s balance sheet when the time came to begin re-moving accommodation. A few participants were con-cerned that an extended period of accommodation or an additional large-scale asset purchase program could increase the risks to financial stability or lead to a rise in longer-term inflation expectations.

Then IOER rate cut:

Some participants commented on other possible tools for adding policy accommodation, including a reduc-tion in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets. It was noted that the ECB’s recent cut in its deposit rate to zero provided an opportunity to learn more about the possible consequences for market functioning of such a move. In light of the Bank of England’s Fund-ing for Lending Scheme, a couple of participants ex-pressed interest in exploring possible programs aimed at encouraging bank lending to households and firms, although the importance of institutional differences between the two countries was noted.

On the phrasing of the statement:

With respect to the statement to be released following the meeting, members agreed that it should acknowledge the deceleration in economic activity, the small gains in employment, and the slowing in inflation reflected in the economic data over the intermeeting period. Because most saw no significant changes in the medium-run outlook, they agreed to continue to indi-cate that the Committee anticipates a very gradual pickup in economic activity over time and a slow de-cline in unemployment, with inflation at or below the rate that it judges most consistent with its dual man-date. Many members expressed support for extending the Committee’s forward guidance, but they agreed to defer a decision on this matter until the September meeting in order to consider such an adjustment in the context of updates to participants’ individual economic projections and the Committee’s further consideration of its policy options....Consistent with the concerns expressed by many members about the slow pace of the economic recovery, the downside risks to economic growth, and the consider-able slack in resource utilization, the Committee decid-ed that the statement should conclude by indicating that it will provide additional accommodation as need-ed to promote a stronger economic recovery and sus-tained improvement in labor market conditions in a context of price stability.